Indonesia Construction Industry: Outlook and Opportunities

Indonesia Construction Industry (source:pexels)

The construction industry in Indonesia has been experiencing remarkable growth in recent years. This dynamic sector plays a pivotal role in shaping the nation’s infrastructure, driving economic development, and providing employment opportunities for millions of Indonesians.

In this series of major industries in Indonesia, we will delve into the various facets of the Indonesia Construction Industry, exploring its current status, growth drivers, challenges, and future prospects.

Also read: 7 Reasons and Advantages for Starting a Business in Indonesia

Indonesia Construction Industry Outlook

Indonesia Construction Industry (source:pexels)
Indonesia Construction Industry (source:pexels)

The Indonesian construction industry is one of the largest and fastest-growing in Southeast Asia. In 2023, the industry is expected to be worth USD 264.34 billion, and is projected to grow at a CAGR of 7.5% to reach USD 379.41 billion by 2028.

Several factors propel the industry, comprising:

  • Government investment in infrastructure

    The Indonesian government is investing heavily in infrastructure development, including roads, railways, airports, and power plants. This investment is expected to continue in the coming years, as the government seeks to boost economic growth and improve connectivity.

  • Population growth

    Indonesia has a large and growing population, which is driving demand for new housing and other infrastructure.

  • Urbanization

    Indonesia is rapidly urbanizing, with more and more people moving to cities. This is creating demand for new commercial and residential buildings, as well as for improved urban infrastructure.

Also read: 10 Reasons Why You Should Invest in Indonesia

Construction Business Opportunities in Indonesia

There are a number of business opportunities in the Indonesian construction industry. Among the most hopeful sectors are:

  • Infrastructure development

    The government’s infrastructure investment program is creating opportunities for construction companies of all sizes.

  • Housing development

    The demand for new housing is growing rapidly, particularly in urban areas.

  • Commercial development

    The growing middle class in Indonesia is driving demand for new commercial buildings, such as shopping malls, office towers, and hotels.

  • Industrial development

    Indonesia is becoming a major manufacturing hub, and this is creating demand for new industrial facilities.

Also read: 25 Profitable Business Ideas and Opportunities in Indonesia

Indonesia Construction Business Regulation

The Indonesian government has a number of regulations in place to govern the construction industry. These regulations are designed to ensure the quality and safety of construction projects, as well as to protect the interests of workers and consumers.

Some of the key regulations that construction businesses need to be aware of include:

  • The Construction Law

    This law provides the overall framework for the construction industry in Indonesia. It covers aspects such as licensing, permits, and dispute resolution.

  • Government Regulation No. 14 of 2021

    This regulation amends the Construction Law and introduces a number of new requirements for construction businesses, such as mandatory registration with the Construction Services Development Agency (LPJK).

  • The Labor Law

    This law sets out the minimum employment standards for workers in Indonesia. It covers aspects such as wages, working hours, and leave entitlements.

Also read: Understanding Indonesia Business Law

Top Indonesian Construction Companies and Their Market Share

Indonesia Construction Industry (source:pexels)
Indonesia Construction Industry (source:pexels)

The top construction companies in Indonesia include:

  1. PT Waskita Karya (Persero) Tbk
  2. PT Wijaya Karya (Persero) Tbk
  3. PT Pembangunan Perumahan (Persero) Tbk
  4. PT Adhi Karya (Persero) Tbk
  5. PT Hutama Karya (Persero)

These companies have a combined market share of over 50% of the Indonesian construction industry.

Also read: 10 Top Construction Companies in Indonesia

How to Start a Construction Company in Indonesia

To start a construction company in Indonesia, you will need to:

  • Choose a business structure: The most common business structure for construction companies in Indonesia is a Perseroan Terbatas (PT), or limited liability company.
  • Obtain a business license: You will need to obtain a business license from the Investment Coordinating Board (BKPM).
  • Register your company with the Construction Services Development Agency (LPJK).
  • Hire qualified staff: You will need to hire qualified engineers, architects, and construction workers.
  • Obtain the necessary permits for each construction project.

It is also important to note that foreign ownership of construction companies in Indonesia is limited. Foreigners can only own up to 49% of a construction company. The remaining 51% must be owned by Indonesian citizens or companies.

The Indonesian construction industry is a large and growing market with a number of business opportunities. However, it is important to be aware of the regulations in place before starting a construction company in Indonesia.

If you are considering starting a construction business in Indonesia, there are a number of resources and support services available to help you get started.

InvestinAsia is among the companies that specialize in aiding you with company incorporation Indonesia. We boast a team of seasoned experts who can guide you throughout the process of:

If you are interested in starting a construction business in Indonesia, you can start by contacting us for FREE consultation.

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